In response to pressure from the Mortgage Bankers Association (MBA) and the mortgage industry at large, the Consumer Financial Protection Bureau (CFPB) will be providing additional clarification for its TILA-RESPA Integrated Disclosure (TRID) rule – also known as the “Know Before You Owe” rule – this July.
In a letter to “industry trades and lenders” dated April 28, Richard Cordray, director of the CFPB, says the bureau acknowledges that implementation of the new rule poses “many operational challenges.”
“We also recognize that implementation is particularly challenging because of the diversity of participants, from small and large financial institutions, mortgage brokers, real estate brokers, and title companies, though warehouse lenders, investors, due diligence firms and rating agencies, whose perspectives may vary as to what compliance under the new rule requires,” Cordray writes in the letter.
Cordray says in terms of enforcement, the bureau will continue to show leniency toward those lenders found in violation of the rule, provided that they have shown a “good faith” effort to comply. He adds that he is pleased to learn through mortgage origination software company Ellie Mae that TRID no longer appears to be delaying closings, as the average number of days to close in March fell back to a normal range.
As indicated in the letter, one of the problems that lenders and other industry players have been struggling with is a lack of clarity pertaining to certain operational aspects of the new rule. In the letter, Cordray points out that the bureau’s Regulatory Implementation Web page provides a wealth of information that lenders and other companies can use in determining how to comply. The implementation page includes links to the compliance guide, annotated disclosure forms, fact sheets and an illustrative disclosure timeline, as well as links to past webinars.
Although acknowledging that many lenders have requested clarification of the rules in writing, Cordray’s letter seems to indicate that the CFPB has, for the most part, been pointing lenders to its implementation Web page when they ask specific questions. Part of the problem, it seems, is that when the bureau provides some “informal guidance” – such as when it responds to a question asked during a webinar – that guidance is sometimes not included in the official documents found via the implementation page.
“We do recognize that incorporating some of the bureau’s existing informal guidance, whether provided through webinar, compliance guide or otherwise, into the regulation text and commentary would be helpful,” Cordray writes in his letter. “We also believe there are places in the regulation text and in the commentary where adjustments would be useful for greater certainty and clarity.”
To that end, the CFPB has begun to draft a notice of proposed rulemaking that will likely be released in late July.
In a statement, Pete Mills, senior vice president of residential policy and member services for the MBA, says the association “is very pleased with CFPB’s letter and believes the approach laid out should provide a swift path to issuing a final rule that will give lenders, the secondary market and consumers the clarity and consistency of disclosures the market needs.”
“In the meantime, we appreciate that the bureau’s ‘diagnostic period’ for the Know Before You Owe rule will continue to accommodate good faith compliance efforts,” Mills adds. “Finally, we look forward to continuing to work with the bureau on this and other issues in hopes of protecting consumers and strengthening the real estate finance industry.”
